New, much lower values help business cash flow

WINDSOR — Pharmacist Mark Burger and his wife, Terri, wanted to buy the 1,330-square-foot corner commercial condominium in which they opened Health First Pharmacy in the Town Green Village mixed-use development in central Windsor in 2003, but the asking price was too high. But thanks to about three dozen such units at the 14-acre development coming on the market for sale in the past few months, the Burgers and other Town Green Village tenants as well as investors are buying up the condos at a fraction of original prices.

Longtime Town Green Village tenant Health First Pharmacy will be relocating to larger, higher-tech quarters across the street thanks to a big sale of Wells Fargo-owned commercial condominiums.

“We have two places now and will pay less in improvements and mortgage than lease payments,” Dr. Burger said.

The Burgers bought 1,000 more square feet in two retail condos across the street from their current location and want to open a higher-tech integrative compounding pharmacy there in the next six months.

The Burgers’ purchases April 27 and June 29 were two of 14 commercial units Wells Fargo Bank put on the market in March as a reorganization plan was being confirmed in Bankruptcy Court in Santa Rosa on $12.1 million in liabilities claimed by lead Town Green Village developer Orrin Thiessen, according to court documents and public records.

Confirmed by the court April 23, the plan turned over to lenders dozens of properties at Town Green Village and Starr Station mixed-use developments in Windsor as well as projects in Sebastopol, Forestville and Cotati as collateral on $11.3 million in loans on those properties, the document said. Beside Wells Fargo’s 14 units at Town Green Village, Westamerica Bank got back 15 commercial condos, Rabobank nine, and California Bank & Trust three.

Allen Coffin, owner of Pack Ship & More on Windsor River Road in Town Green Village, took advantage of a big lender sale of commercial condominiums to lock in longer-term lower real estate costs.

Some Town Green Village properties had gone back to North Valley Bank and Rabobank in 2011.

Wells Fargo has sold all but one of its Town Green Village commercial units, and the last is set to close escrow by the end of this month, according to Preston Smith, one of the Cornish & Carey Commercial Newmark Knight Frank listing agents. Sale prices ranged from $105 to $197 a square foot, varying depending on size, location and type of unit. That’s half to one-eighth of the original prices, Mr. Smith said.

“A lot of the tenants in the spaces, who were offered the units first, bought them because with SBA and interest rates so low, they could own for less than they pay in rent,” he said.

After operating Chinois Asian Bistro for nearly five years at 186 Windsor River Rd., one of the proprietors, who also operate Ume restaurant down the street, purchased Chinois’ space from Wells Fargo.

“Cash flow-wise, this helps us quite a bit,” said Chang Liow. “It gives us flexibility going forward, because it lets us know we’re going to be here long-term versus being at the mercy of the solvency of the landlord.”

He estimates the switch to ownership will cut cash outflows by 10 percent to 15 percent compared with paying rent to an outside entity.

“Every little bit helps,” he said.

Other tenants who purchased their spaces from Wells Fargo include Tomi Thai Restaurant on David Clayton Lane, Empire Communications on Johnson Street and Pack Ship & More a few spaces down from Chinois.

Rhonda Deringer of Keegan & Coppin has been leading listings on a couple dozen units so far for several lenders: six for North Valley Bank, one for Summit State Bank, nine for Rabobank together with Bill Kampton and Steve Crocker of Colliers International and seven for Westamerica. California Bank & Trust holds three units that haven’t come on the market yet.

So far she’s sold 11 units, eight are in escrow, with several to close this month, and offers to purchase six were submitted last week. She’s also helped negotiate for buyers of some of the Wells Fargo units.

“These have been great deals for business owners and investors,” she said. “Some of the units were vacant and tenants were on month-to-month leases, and they’ve negotiated new leases with the buyers. There have been a lot of local investors, and one is from outside the U.S.”

A common complaint among tenants at Town Green Village, even blamed for a number of the business failures there, has been high rents being charged by the original developers and investors. Like other projects built during the construction boom, Town Green Village loans were secured near the peak of property values, contributing to high sale prices and rents for residential and commercial condos.

But the reset in values at Town Green Village as the lenders quickly unload their properties is helping existing and new business at the development. Among the newcomers is a 1,580-square-foot office on Johnson Street purchased by Windsor dentists Steve Scott and Kyle Scott. Their office currently is in the Lakewood Shopping Center on the east side of the town.

Still awaiting a buyer are the two partly built buildings — one with erected structural steel and the other barely past the slab — at the southern edge of Town Green Village, being marketed for North Valley Bank by Randy Waller of W Real Estate.

Town of Windsor officials have spent hours meeting with a handful of developers interested in finishing the projects to explore what can be done to remove the negative image of an abandoned project, according to Jim Bergman, town planning and building director.

The buildings have entitlements for building, but construction permits are still needed to finish them. And the fees to do so have been a big topic of those talks, according to Mr. Bergman and real estate sources. Waiving or deferring some or all the fees to get the buildings completed would have to be approved by the Town Council and could run into problems of fairness to developers of other projects, town needs to pay for services and unwelcome consequences for prospective purchasers of the projects, he said.

“Deferring or waiving fees is dangerous because it triggers prevailing wages, and developers may not want that,” he said. Federal and state laws consider that to be provision of government money for private projects and require prevailing wages of organized labor to be paid on such projects.

While construction on those unfinished buildings might be a ways off, tenant and owner improvements could spur work in the existing buildings as new owners leverage the much lower cost basis to upgrade the spaces, according to Mr. Bergman.

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